Ethical investments on the rise

According to EIRIS there are currently around 750,000 people putting money into ethical investments, back in 1999 that figure was just 200,000 with a total of £2.4 billion in ethical funds.
In the United Kingdom the first ethical fund, the Stewardship Growth Fund, was introduced in 1984 by Friends Provident, but look back a decade and still there where only a handful of ethical funds available. Now there are almost a hundred different ethical options for investors to choose from, with a broad range of products amongst them.

With more and more people becoming aware of the importance of matters such as climate change and human rights the interest in ethical investing is expected to rise even further, leading to more growth for financial institutions in the UK in general.

Ethical investing is still far from a perfect procedure, fund managers face problems as they are limited to choosing only ethical products, meaning they may have to overlook a large number of potential funds on ethical grounds. This then means their performance levels may come up short against unfettered funds.

Although ethical funds generally offer a poorer performance than their morally-challenged counterparts this doesn’t have to be a problem provided the investors are aware of the risk, and are willing to accept the poor performances as an unavoidable factor of choosing the ethical option. That isn’t to say bad performances are a certainty, there have been occasions when ethical funds have actually outperformed their rivals.

Despite the huge leap in ethical investing the overall scope is still small. Of course £9.5 billion is a tidy sum but compared to the amount of money put into investing in the UK in total, £510 billion, it makes up but 2 percent. Whilst the benefits and peace of mind that come with ethical investing are many it may still be at a stage where canny investors are still too wary of the products.